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Lower returns predicted for commercial property in 2015

New research indicates that commercial property will deliver lower investor returns this year, in comparison to 2014.

According to the US commercial real estate company CBRE, overall returns in commercial property are estimated to reach 14% across the UK in 2015, compared to 19.7% in 2014.

Chris Brett, Head of International Capital Markets at CBRE, said:

“Commercial property investments won’t deliver the same return as in 2014, but our monthly index is likely to show total return of 14% for 2015, well ahead of the 8.2% average since 2000.

“London and the South East have been an engine for growth, driving returns in both office and industrial markets.”

The central London office market out performed the rest of the UK in 2015, with total returns reaching 16.8% so far this year, in comparison to the 12.8% total returns seen across the UK’s commercial property overall. Midtown experienced the strongest growth, delivering a return of 21.5% so far this year.

Central London has benefitted from overseas capital since the crisis, but this is said to have reached a plateau of about 70% in 2014-15, as according to CBRE, investors are now looking further afield.

International investment in other parts of the UK accounted for 32% of overall investment, up 20% from previous figures.

This trend is mirrored globally, with investors focusing on ‘second tier’ cities, which are reported to provide better yield and greater availability than gateway markets.